Krispy Kreme adjusted earnings jump 17%

WINSTON-SALEM, N.C. — Net income of Krispy Kreme Doughnuts, Inc. in the three months ended Aug. 4 was $4,717,000, equal to 7c per share on the common stock, down from $4,929,000, or 7c per share, in the second quarter last year. Adjusted for a $967,000 million charge related to the refinancing and retirement of debt as well as for taxes currently payable, net income for the quarter was up 17%. Sales were $112,729,000, up 10% from the second quarter of fiscal 2013. James H. Morgan, chairman, president and chief executive officer, said results “exceeded our expectations,” calling the figures “outstanding.” Particularly noteworthy was a 10% increase in same-store sales, the nineteenth consecutive quarterly increase.

“Our dramatic same-store sales gain was driven primarily through higher traffic counts as customers found more reasons to treat themselves to our unique products, while improvements in our company stores and supply chain segments drove an increase in consolidated operating margin,” he said. “Fiscal 2014 is proving to be an exciting year for our business, and we continue to forecast year-over-year growth in adjusted earnings per share approaching or exceeding 30%. Attaining the high end of our forecasted earnings guidance appears increasingly achievable.”

Also of significance were positive initial results from five new small factories opened in 2013, Mr. Morgan said. The shops are about 2,400 square feet in size. He said the factories would have “all the donut-making capabilities” of traditional stores but would be less costly to operate (though more expensive to build).

“While we are looking forward to gaining additional experience with these shops and the four to five small factories we plan to open in the remainder of fiscal 2014, we are now sufficiently confident about the model to encourage our franchisees, new and old, to incorporate this format into their expansion plans. We expect the success of this new smaller and more efficient model will greatly enhance our long-term global expansion potential.”

In the six months ended Aug. 4, net income was $12,716,000, equal to 19c per share, up from $10,955,000, or 16c, in the first half of fiscal 2013. Net sales were $233,354,000, up 11%.

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